The United Arab Emirates is one of the most successful economies in the Middle East. And it is on its way to becoming one of the most prosperous places on the planet. For those who wish to invest their capital in the region, we will analyze the 5 most important stock market indices of the UAE.
- DFM General
- FTSE Nasdaq Dubai UAE 20
- FTSE ADX General
- MSCI United Arab Emirates
- MSCI All UAE
With a population of around 10 million people and one of the highest demographic growth rates in the world, the United Arab Emirates is one of the most dynamic and promising places in the world. And it has extremely ambitious plans for its future.
Such population growth is due to a steady inflow of workers from other countries to emirates such as Dubai and Abu Dhabi. Nowadays, over 90% of the people living in the UAE have been born abroad.
This demographic boom has been accompanied by spectacular economic growth. The UAE has become one of the richest countries in the world. In this sense, places like Dubai are on their way to becoming more modern versions of Hong Kong and Singapore.
The UAE is famous for its numerous skyscrapers, as well as records of various types. However, the truth is that it is also working hard to establish itself as one of the most relevant financial and business centers worldwide. Especially if we take into account the increasingly important role that the Middle East plays in the world, both from a geopolitical and energy perspective.
The capital of the country is located in Abu Dhabi. However, its most famous city, as well as the place where we find the largest stock market in the region is Dubai. Financial flows from all over the world trade here.
The local currency is the United Arab Emirates dirham, whose ISO code in the financial markets is AED. This currency is completely pegged to the US dollar, at an exchange rate of 3.67 dirhams for each dollar. This exchange rate has been in effect since 1997. So, at the monetary level, investing in the UAE is synonymous with doing it in dollars. We should not have any currency risk.
For those investors who want to benefit from the economic growth that will take place in the UAE, next, we analyze its 5 most important stock market indices.
The DFM General Index is the main stock market index of the Dubai Financial Market (DFM) for the United Arab Emirates. This index is calculated by the company S&P Dow Jones, which works in partnership with Dubai Financial Market, the largest stock exchange in the city.
Within the index, companies are weighted based on their market capitalization adjusted for free float. This is done to reflect the number of shares of a company that are actually listed and traded on the stock exchange.
The DFM General includes all companies listed on the DFM that meet the minimum liquidity and free float criteria. As a result, it is one of the best indicators to assess how the market value of the corporate sector of the United Arab Emirates evolves over time.
Over the last few decades, the value of the index has had drastic movements, both upwards and downwards, reflecting the high level of volatility in the domestic economy and, especially, in the capital flows of international investors.
If you want to read more information about the DFM General, you can visit the website of Dubai Financial Market.
FTSE Nasdaq Dubai UAE 20
The FTSE Nasdaq Dubai UAE 20 is a stock market index calculated by the British company FTSE Russell.
This index is composed of the 20 Emirati companies with the largest market capitalization that are listed on the Nasdaq Dubai, a stock exchange that is part of the Nasdaq group. Nevertheless, it should be noted that the ownership of Nasdaq Dubai has been Emirati since 2010, when it was acquired from the previous owner Nasdaq itself.
This index was designed so that investment management companies could offer passive investment vehicles to their clients. Thanks to that, the FTSE Nasdaq Dubai UAE 20 is an ideal candidate for ETFs.
Emaar Properties and First Abu Dhabi Bank are two of its largest holdings. For additional details, here is the link to the FTSE Russell website.
FTSE ADX General
The company FTSE Russell calculates other indices for the country’s stock market. One of them is the FTSE ADX General, built in partnership with the Abu Dhabi Financial Market. This index features all companies listed on the Abu Dhabi stock exchange, weighting them according to their free float-adjusted market capitalization.
Thus, this index would be the equivalent for Abu Dhabi of the General DFM for Dubai. The FTSE ADX General is strongly dominated by the financial sector, especially International Holdings Company.
For more information about it, you can visit the FTSE Russell website.
MSCI United Arab Emirates
The American company MSCI calculates a couple of indices for the United Arab Emirates. One of them is the MSCI United Arab Emirates, which is composed of all the Emirati companies that are part of the global MSCI Emerging Markets index.
Despite the country’s wealth and advanced level of development, MSCI has not yet classified the UAE as a developed country. However, this is something that could change in the future.
Within the MSCI United Arab Emirates, we will find about 10-15 companies, depending on the stock market performance of the country’s corporations. Two of its most important companies are Emirates Telecom and First Abu Dhabi Bank. Here is the link to the MSCI website so you can find more details about it.
MSCI All UAE
Finally, MSCI also calculates the MSCI All UAE, a stock market index that includes all Emirati companies that can be found in the global MSCI Emerging Markets IMI index.
The difference between this index and the previous one is that a much smaller size is needed for a company to be part of the MSCI All UAE. Hence, we have many small-cap stocks in it. In total, more than 30 companies are part of the MSCI All UAE index.
However, stocks are still weighted according to their market capitalization adjusted for free float. For this reason, the correlation between both indices is very high.
For more information about the MSCI All UAE, you can visit the MSCI website.
I hope you found this article about UAE stock market indices helpful. If you want to learn about the stock market indexes in Saudi Arabia, another country in the Middle East, you can check out this post:
Top Stock Market Indices in Saudi Arabia
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